2019 (1) TMI 265 - AT - Income Tax

Addition u/s 14A r.w.r.8D - Held that - CIT(A) has deleted the additions made by the Assessing officer u/s 14A of the Act on the ground that the assessee did not earn any exempt income during the year under consideration. The issue is squarely covered in favour of the assessee by various decisions of the Hon ble High Courts including case of CIT Vs. Winsome Textiles 2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT and Cheminvest Ltd Vs. ITO 2015 (9) TMI 238 - DELHI HIGH COURT wherein held no disallowance is attracted u/s 14A in case the assessee has not earned any income not forming part of the total income.- Decided in favour of the assessee Addition of the interest expenditure u/s 36(i)(iii) - interest free advances - Held that - In the earlier assessment year 2012-13 which has been decided by this Tribunal in the own case wherein, the Tribunal after considering the rival submissions of the parties has decided the issue in favour of the assessee by holding that assessee was possessed of sufficient own funds to meet the investment / interest free advances made. The Tribunal while allowing this issue in favour of the assessee has relied upon the decision in the case of Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT and Bright Enterprise Pvt Ltd. Vs. CIT 2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT - decided in favour of the assessee

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act
2. Disallowance under section 36(I)(iii) of the Income-tax Act

Issue 1 - Disallowance under section 14A of the Income Tax Act:
The Revenue appealed against the deletion of disallowance made by the Assessing Officer under section 14A of the Income Tax Act. The CIT(A) deleted the additions based on the ground that no exempt income was earned during the relevant year. The Tribunal noted that various High Court decisions, including Punjab and Haryana High Court, have held that no disallowance is warranted under section 14A if the assessee did not earn any income not forming part of the total income. Consequently, the Tribunal found no merit in the Revenue's appeal on this issue.

Issue 2 - Disallowance under section 36(I)(iii) of the Income-tax Act:
The Revenue contested the deletion of the addition made by the Assessing Officer under section 36(I)(iii) of the Income Tax Act concerning interest expenditure. The Tribunal referred to a previous decision in the assessee's case where it was held that the assessee had enough own funds to cover the interest-free advances made. Relying on various High Court decisions and the Supreme Court's ruling in other cases, the Tribunal found in favor of the assessee. The issue was decided in line with precedents favoring the assessee, and no distinguishing fact was presented for the current year. Therefore, the Tribunal dismissed the Revenue's appeal on this issue as well.

The judgment concluded by stating that no other issues were raised, leading to the dismissal of the Revenue's appeal. The appeal was dismissed, and the order was pronounced in open court on 17.12.2018.